First Quarter Transport Review
OTR, ocean and rail segments performed well while air freight was sluggish. The 50 biggest trucking firms collectively put in their strongest performance in years with TL leading the way, parcel and same-day couriers closely behind and the LTL sector growing least quickly. On the LTL side, Old Dominion posted an industry leading Q1 OR of 91%, while UPS & Vitran ORs hit 100 & ABF came in at 106. TL carrier Werner Enterprises had an upside quarter and outperformed its rivals Knight, Swift & Heartland, who all had profitable but weaker quarters than Werner. JB Hunt, a market leading intermodal TL player had a record breaking quarter reporting revenue up almost 20% y/y. Notably, while JB Hunt delivered decent truck margins, intermodal volumes increased by 15% y/y and management expects mid-teen volume growth to continue in intermodal.
Hunt’s experience is consistent with a wider trend. Both bulk & intermodal railroad shipments have shown consistent growth for over a year now. The railroads continue to benefit from fuel costs that hurt trucking more than rail, and are getting an added boost as import/export activity at US ports continues to increase.
Most railroads posted significant intermodal growth on their networks in Q1 as did most public and private container shipping companies. With the resurgence in activity at US ports in 2010, shipping lines reported recorded profits of more than $11b, compared to $15b in losses in 2009. Air freight volumes were up this quarter but pricing was off. Some analysts think air freight growth will begin to slow now as fuel prices are a major drag on this sector’s growth. A notable winner in this arena is Forward Air, as their airport-to-airport LTL service allows the company to enjoy the relatively higher air freight rates while enjoying the lower cost structure of sending trucks (as opposed to planes) between airports. Forward’s y/y net income doubled on a 12% increase in revenues.
In company news, Deutsche Post AG sold wholly owned subsidiary Exel Transportation, an intermodal and TL carrier (with some LTL) to Hub Group, who plan to invest heavily from the outset in domestic containers. The new company will be re-branded Mode Transportation and led by the current Exel Transportation management team. Another Deutsche Post AG subsidiary, DHL, exited the US package business 3 years ago, closing 75% of its outlets and firing 15,000 employees after losing almost $10b in an effort to build a domestic package operation to compete with USPS, FedEx & UPS. Last month, the company announced that it beat its 2011 packageper-day goal in the US by 15,000 parcels.
Ted Morandin
410.349.9002
Morprop (www.morprop.com) provides advice to investors and their advisors regarding industrial transportation real estate. In addition to real estate expertise, Morprop’s directors include former senior transportation executives from Yellow Corporation (now YRCW), Purolator, Conway, FedEx Freight and Vitran. Morprop also provides research and management services to the ITPN (www.itpnetwork.com), the largest transportation real estate network in North America. Network brokers have an average of approximately 20 years of industrial real estate brokerage experience in their local markets and a deep understanding of transportation real estate. The brokers in the network have moved hundreds of transportation real estate assets and have significant liquidation experience in the sector.
